By Kymberly Martin
NZ swaps closed down 1-3bps across the curve. Overnight, US 10-year yields stepped up from 2.60% to sit around 2.69%.
NZ 2-year swap closed at 3.32%, struggling to push lower as paying interest remains at the short-end of the curve. The 2-10s curve sits a little flatter at 131bps.
Overnight, the Bank of England and ECB left rates unchanged as expected. But the catalyst for rates markets came later in the night when US data showed a broadly positive tone across the board. This was dominated by the US ISM. This saw German and US yields push higher.
US 10-year yields moved up sharply from 2.60% to 2.69% currently, towards the upper-end of their ranges of the past six weeks.
This illustrates our view that rates are ultimately now more responsive to data than Fed rhetoric.
Aussie futures also followed overnight, suggesting upward pressure on NZ yields at the open, particularly at the long-end of the curve.
There are no domestic data scheduled today. Expect the NZ market to remain with its eyes firmly fixed offshore, heading into tonight’s US payrolls report. A stronger-than-expected report could see US 10-year yields test the 2.75% top of their current range.
However, with a fair amount of optimism now priced by markets a solid report (185k expected) will be required just to keep yields at current levels.
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